The Standard & Poor's 500 index—commonly called the S&P 500, or simply the S&P—is the primary gauge of the large-cap U.S. equities market. It is based on the market capitalization figures of the top 500 companies that list their common stock on the NYSE or NASDAQ. The popular index has almost $10 trillion worth of financial products indexed or benchmarked to it.
S&P 2018 Performance
Based on available historical data, the S&P has generated an average annual return of around 9.8% from 1928 through 2016. In 2018, however, the annual return from the S&P 500 index was negative, standing at around -2.76% between Jan. 2, 2018 and Dec. 14, 2018. As of mid-December 2018, the S&P 500 is hovering near 2,600 and expects to close the year within (plus or minus) 100 points. In 2017, the S&P 500 posted a healthy total return of more than 19.7%. Based on the reports from various investment firms, the predictions for 2019 vary widely, with claims that the index would end 2019 anywhere between the broad range of 2,750 to 3,350.
Contributors to the Downturn
A number of factors have roiled overall market returns this year—such as the rising interest rate environment; the global economy's fragmented and limited expansion; negative effects of the U.S.-China trade war; geopolitical and financial turmoil in emerging markets; the late-stage technology sector-led decline; and the credit market sell-off.
A Look at the Sectors
In the S&P 500 index universe, healthcare emerged as the best performing sector for 2018; followed by the utilities, and consumer discretionary sectors. Materials, communication services, energy, and industrials were the worst performing sectors, in that order, and dragged down the overall market.
2018 Top Stock Performers
The following five top-performing stocks helped the S&P 500 index stay afloat in 2018. The list below is in order of year-to-date (YTD) performance based on the opening price on Jan. 2, 2018 and the closing price on Dec. 14, 2018.
1. Advanced Micro Devices (AMD)
- Market Cap: $19.41 billion
- Price Change: +$8.92
- Performance against the S&P 500: +81%
The Santa Clara, Calif.-based semiconductors specialist Advanced Micro Devices, Inc. (AMD: NASDAQ) has been the best performing stock of 2018 with an annual gain of more than 81%. Advanced Micro Devices's earnings were boosted by increased demand for the company's new central processing units (CPUs), which are used in traditional electronics like computers and video games. The business was also handily supported by a booming demand for its graphics processing units (GPUs), which find use in the rapidly evolving cryptocurrency and blockchain space as well as in cloud-computing applications and data-center operations. The company also benefited this year when its competitor Intel, Inc. (INTC: NASDAQ) struggled with production problems that led to an undersupply of its 10-nanometer (nm) chip.
Advanced Micro Devices expects to launch its 7-nm chip soon, which will allow the company to compete with Intel, though a few analysts opine that the chip, itself may not be able to generate big gains for Advanced Micro Devices because Intel’s 10-nm chip would still maintain its market share. However, the significant decline in cryptocurrency mining mania and the news of Intel fixing its 10-nm chip production problem sooner than expected halted the dream run of Advanced Micro Devices, resulting in a steep decline in the stock price during the latter half of the year. Although Advanced Micro Devices's stock price is down more than 60 percent from the handsome triple-digit YTD gains realized during September, it remains the leader in the S&P 500 index with the best returns for 2018.
2. TripAdvisor, Inc. (TRIP)
- Market Cap: $8.12 billion
- Price Change: +$25.93
- Performance against the S&P 500: +75%
The Needham, Mass.-based online travel company TripAdvisor, Inc. (TRIP: NASDAQ) stands second in the list of the best performing S&P 500 stocks for 2018. Operating with two segments, hotel and non-hotel, the stock of the leisure company generated an annual return of 75% this year. Although TripAdvisor's hotel segment had a modest performance, the company's stock price got a major boost during the second quarter when its non-hotel segment saw significant year-over-year (YOY) growth of 37%. The momentum continued carried into the third quarter, which saw a 20% increase in revenue from the non-hotel segment, including tours, restaurants, and other leisure activities. TripAdvisor's stock struggled during the earlier part of the year as it faced increasing competition and changes in travelers’ habits. However, the company was successful in reducing its marketing expenses and expects to reap continued benefits from product enhancements, platform expansion, and marketing optimizations in the future.
3. Abiomed, Inc. (ABMD)
- Market Cap: $13.62 billion
- Price Change: +$123.7
- Performance against the S&P 500: +65%
Abiomed, Inc. (ABMD: NASDAQ) is a healthcare sector company that makes minimally invasive heart pumps. With an annual return of around 65%, it stands third in the list of this year's best-performing stocks. Following a steady rise in its stock price through June, Abiomed has been a seesaw ride during the second half of the year. In September, the stock price jumped by double digits when Abiomed presented data indicating that use of its Impella heart pump led to an increase in the survival rate of patients with cardiogenic shock. Being a high-growth, high-beta stock, the company's declines in October and December likely should be attributed to the market-wide sell-off.
In November, the company beat on earnings for the quarter ended September 2018, which showed that revenues from Abiomed's Impella heart pumps increased by 38% year-over-year (YOY). Backed by the solid financial performance, Abiomed also raised its fiscal 2019 guidance. Abiomed is expected to focus on expanding its line of Impella devices across indications and geographical markets as it heads into 2019.
4. Fortinet, Inc. (FTNT)
- Market Cap: $12.03 billion
- Price Change: +$28.56
- Performance against the S&P 500: +65%
The global cybersecurity solutions provider Fortinet, Inc. (FTNT: NASDAQ) ranks fourth among the best-performing S&P 500 stocks of 2018. Although Fortinet's annual return of around 65% compares with that of Abiomed, its stock price performance has been comparatively consistent. A significant 52% year-over-year increase in earnings and a 21% YOY increase in revenue during the second quarter boosted Fortinet's stock price. Fortinet saw heightened concerns around online frauds and security breaches in 2018, and there were multiple reports of high-profile online companies getting hit with data thefts, misuse of user information, and security flaws. These issues have helped stocks like Fortinet gain big amid speculations about the increased need for upgrades to firewalls and security systems.
In September 2018, Fortinet launched the FortiNAC product line for Internet of Things (IoT) services, earning the company recognition as a leader in unified threat management (UTM) by Gartner. In 2019, the connectivity boom and 5G services should give Fortinet a boost.
5. Advance Auto Parts (AAP)
- Market Cap: $11.71 billion
- Price Change: +$57.69
- Performance against the S&P 500: +55%
Roanoke, Virg.-based Advance Auto Parts, Inc. (AAP: NYSE) is a retail provider of automotive replacement parts and maintenance items. The stock had a steady upward run during 2018, generating an approximate 55% annual return. Advance Auto Parts witnessed consistent growth in sales during the first half of the year in both its do-it-yourself (DIY) retail and DIY online segments, which helped the company beat Street expectations. The reduced U.S. corporate tax rate, from 35% to 21%, also helped to hike earnings.
In October, Advance Auto Parts announced a strategic partnership with retail major Walmart Inc. (WMT) to create an automotive specialty store on the Walmart.com shopping portal, which should help the company gain a much larger market share. The country's increasing number of aging vehicles also should spurAdvance Auto Parts's growth in 2019.